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Investing in Art and Antiques for Fun and Profit

By , June 20th, 2018 | No Comments


Investing in Art and Antiques for Fun and Profit

Yes, you make money investing in art and antiques and have fun while you do it — if you’re savvy about things.

Although the rate at which antiques appreciate hasn’t been benchmarked, fine art has delivered an average annual return of 8.9 percent since 2000, according to Artprice.com.

To achieve anything comparable requires does require knowledge of the world of art and antiques, but if this is something you’re already interested in, that can make this a fun type of investing.

Diversification

Investors learn that having a diversified portfolio helps protect your money during market fluctuation. Diversification spreads out your risk: that way, if one area is experiencing losses, they might be offst by gains in other areas.

As such, antiques and art provide a great opportunity to diversify your investments — which can improve your overall performance.

The diversification comes from the fact that their values are not correlated to stock prices. If your stocks go down, your antiques and art might not lose value at the same time. In fact, they may flourish during these periods.

Illiquid Assets

However, it’s important to note that art and antiques are illiquid assets: You can’t sell them as easily as you might be able to unwind other types of investments.

Instead, you have to track down a buyer or find a suitable mechanism, like an auction, to attempt to make a sale.

This means antiques and art aren’t ideal as immediate income sources. However, if you embrace a long-term buy-and-hold strategy, pay attention to the market, and properly time your sales activities, you can make a significant profit.

Unique Costs

While all investments cost money — and that’s generally reflected in the price you pay for them — there are additional costs associated with art and antiques.

First, you must house the items. Whether this means placing them in your home or an appropriate storage unit, one way or another you’re paying for that.

If you have to store it somewhere other than where you reside, you need to make sure it’s somewhere you will be able to control the temperature and humidity — to protect the art and antiques from damage.

Insurance

Speaking of the potential for damage, you will need to insure your art and antiques. This might require you to first pay for an appraisal to determine their value so you know how much coverage to buy.

Then, you need to secure coverage through an insurance provider. High-value items may require you to purchase a rider on your homeowners’ or renters’ insurance; or you might need to obtain a completely separate plan, depending on which insurer you choose.

Maintenance

Another cost associated with art and antiques involves care and maintenance, which makes sure the assets do not lose any value.

roper cleaning techniques are a must, especially if you are going to use the items in your décor.

You also need to be careful when you use them, such as by using coasters on antique tables to avoid condensation rings.

Commissions

Additionally, depending on how you intend to buy and sell your antiques and art, you might end up paying commissions.

Not unlike the commissions you pay when you buy and sell stock, third-party art and antique auctioneers and dealers charge fees for their services.

The commissions usually amount to a percentage of the sale value — so it’s in the dealer or auctioneer’s best interest to command the highest price for items. If you sell through an auctioneer instead of a dealer, you might want to set a minimum sale price.

Popularity is an Important Factor

Since art and antique sales are predominately managed in the private market, popularity is a primary driver for value. Just because an antique or piece of art is old, that doesn’t automatically make it valuable.

Specific artists or craftspeople, periods, or styles may be more appealing for a certain period of time. Then, similar to a fad, interest may fade, leading the pieces to lose at least some of their value.

Similarly, supply and demand play a substantial role. Antiques and art only have value if there is a buyer willing to make the purchase. If a piece or artist is in demand, people may increase the amount they are open to paying in an attempt to secure the item. In an auction-style setting, this creates a bidding war, driving the price up.

However, if an antique or piece of art isn’t in demand, finding even a single buyer may be a challenge. If you really need to sell the item, you may have to accept a lower price to complete the transaction.

Investing in Art and Antiques for Fun and Profit

One of the benefits of investing in art and antiques is that you can actually enjoy the items — unlike stocks and bonds, which you can’t put on display the way you can with furniture, paintings, and sculptures can be a part of your décor.

If you enjoy the works of a particular artist, adore a furniture period, or simply find pieces that bring you joy, it can be fun to add them to your collection. This provides you with some level of intrinsic value, which can be just as beneficial as a financial gain.

Plus, if you appreciate the piece, embracing a buy-and-hold strategy isn’t a burden. You can enjoy the work while it is in your home, making it easier to wait until the market supports a high sales price.

Risk of Fakes

Just like any other type of investment, there are risks associated with art and antiques — such as the prevalence of fakes and bogus reproductions.

If you are looking at the items as an investment, you need to seek out reputable dealers and auction houses who can vouch for their authenticity and that an item is original.

Ideally, you want verification from an expert in writing and, if available, records about the piece’s history, including previous owners and details that show the piece is genuine.

Before you invest in art and antiques, do your research. That way you can make sure you are truly getting an investable item and not something that won’t retain or improve its value.

Readers, what kind you collect antiques and art as an investment? Tell us about your experience in the comments below.

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